Episode Transcript
Speaker 1 00:00:05 This is annuity straight talk since 2008. Your host Brian Anderson has helped clients nationwide navigate the complex market for annuities with Brian's assistance. Hundreds of clients have achieved a profitable and secure retirement. I would know because Brian has answered many of my questions concerning annuities and retirement planning so that you can benefit as well. Let's get started. Here's Brian
Speaker 2 00:00:49 Hello and welcome everyone to the annuity straight talk podcast. Brian Anderson, coming to you from Northwest Montana on a cold snowy wintery day. It's warming up enough just to start mountain some of the ice, which is great. Looking forward to spring. Here we are for episode 30, I've got a special guest by popular request. Many of you know him who have been around from the beginning. This was his idea to begin with. And he was generous enough to allow me to call it my podcast. But back in Western Washington, here he is a show. Karangi everyone.
Speaker 3 00:01:24 Hello, everyone. Welcome. It's good to be back. I am a contributor to annuity straight talk. This is clearly though Brian's baby, but I always love being able to be on episodes when I can,
Speaker 2 00:01:36 But he said w what happened to a show there? Nothing. He's fine. He just
Speaker 3 00:01:41 Rumors of whatever have been greatly exaggerated.
Speaker 2 00:01:44 Yes, exactly. Everybody's talking about it. It's hit all the major papers, everything.
Speaker 3 00:01:49 I have not been deep platform. Okay. Just wanted to let you all know.
Speaker 2 00:01:53 No, he's a very PC guy, to be honest with you. He says all the right things. He's never going to get canceled, but I, we were talking couple of weeks ago, I guess it was. And I, I kind of had it between the two of us. We have a very similar philosophy and we, you know, our core values of retirement planning are very similar. And so a lot of times we talk about insurance companies and the ones we like the ones we don't like, you know, ones we're concerned about from a financial strength standpoint. And, you know, one of them came across and I don't ever hesitate to hammer on anyone, but a shock reminded me correctly that we're not allowed to use the financial strength ratings of a company to sell against them. Is that fair? A joke. And so when I talked about this company said, you can't do that.
Speaker 2 00:02:46 And then obviously said this from the beginning, he's the more level headed one. And I'm kind of, I don't really care what I say. I'll say what I think. And I wouldn't say it gets me into trouble, but within boundaries, that's, he's here for, because he'll keep me on the straight and narrow. So why don't you talk about what, instead of talking about the negative parts of an insurance company, a shock you out a better idea. I think it'll help a lot of people. So why don't you tell everybody what we're going to talk about?
Speaker 3 00:03:12 Absolutely. So I thought that instead of just taking one insurance company and talking about it, just take a step back and say, how do you evaluate an insurance carrier? What are some of the things that we should be looking at when contemplating, whether an annuity belongs in a certain retirement planning proposal? So let's just look at the 30,000 foot view, as opposed to picking out any companies. And instead give our listeners some tools that can empower them. So I thought we would start one good place to start. I always go to my library and there's a certain book that I've got here by Gordon Williamson. It's called all about annuities. And this came out in 1993. You'll see why that's important in a few minutes, but chapter 10, he has a whole chapter on how to scrutinize an insurance company. And I'm just going to read the introductory paragraph and get your thoughts about it, Brian.
Speaker 3 00:04:11 So Gordon writes, how does the average person find out whether an insurance company can meet its commitments? How can an investor feel confident about an agent or broker that he or she is buying an annuity from? The quality of the insurance company is critical when selecting a fixed rate annuity, since investors' assets are commingled with those of the insurer, if the issuing company's portfolio becomes troubled. So do the contract owners, variable annuity, monies are not mixed with the issuers funds, therefore variable annuity owners need not be concerned with the financial solvency of the parent company, except perhaps for psychological reasons. What do you think about that, Brian?
Speaker 2 00:04:59 I think it's critically important to be honest with you. And it's, it's very timely now because there's a lot of uncertainty in various places in the financial markets. And a lot of people have said, have said to me in the last several months and honestly all my career, well, how do I know this is a really safe place to put money? And, you know, the insurance industry in itself, I think they kind of protect each other in a lot of ways. They lobby together. There have been certain situations where bigger companies have contributed money to bail outs or insolvencies. And so they're kind of all in it together, but I still think that it's really important to, you know, you were talking about security and talking about peace of mind. Now go back to a LIMRA study, life insurance, marketing research association done years ago. And I say this all the time, no matter what anybody says is the number one reason people buy annuities is for safety. So if that's the concern, shouldn't, we have a way to look at companies and determine if we're going for safety. And obviously you're going to, you know, different companies have more or less the same type of contract offers, but you know, if two contracts are about the same, roughly similar benefits, then wouldn't you like a way to talk, uh, figure out how to choose based on the company.
Speaker 3 00:06:25 You're absolutely right. In fact, I would say some industry organizations when we're competing against other proposals, sometimes some producers as we're called, like to work with lower rated insurers. And as we'll see, that can have an impact on maybe what type of income could be coming out of those carriers illustrations, right? Typically the higher rated carriers usually have to keep more in reserves and it might mean a more conservative, lower payout. And this is just across the board. This is not just saying singling out any carriers, but typically when we see carriers that have a lower credit rating, they may be in a position to be able to pay out more. And that might look attractive to people looking to park money in an kind of fixed rate annuity.
Speaker 2 00:07:22 Yeah. And one of the reasons that might be the case I think is because there might be some lower rated companies that are a little more comfortable holding lower levels of reserves or potentially can I look at you, look at the rates available around the world. And I think a couple of weeks ago I looked at, what is it, Brazil, you get a Brazil ten-year treasury from the Brazilian government and it's paying 11 and a half percent interest. Mexico is about seven and a half. So you can go out and get that. But there's a reason why it pays more. Okay. There's a fair bit of risk involved as well. And so certain companies might participate in those types of offers. I'm not speaking specifically about Brazil or Mexican treasuries, but that's kind of one of the issues I think, where, you know, that's where they might be creating the ability to offer a little bit more, but then it's not necessarily as safe as something that's maybe a little bit lower.
Speaker 3 00:08:16 Correct. Then I think we really go back to and finance the greater, the risk, the greater the return. So maybe one area to start with is how do you assess the riskiness of an insurance company? And one of the biggest ways of doing that is by looking at the credit rating. So we have various entities am best is probably the best known and they have a spectrum of ratings eight plus are superior companies. And then at the other end of the spectrum, we may have like something like C minus, which is fair. So typically I think I usually like to work with companies that have a or better ratings from am best. And I think you follow something very similar to, right?
Speaker 2 00:09:09 Yes. That is certainly a place that I start where you look at. I mean, that's the most superficial way you can verify it. Now am best is a good indicator because I think they do all the insurance companies and then the additional ratings agencies, the major ones are S and P standard and Poor's Moody's and Fitch, and then Weiss, the grumpy man that doesn't rate anybody well is, uh, I've had some people say, oh, I like Weiss. Okay. I mean, he gives, I think he gives New York life a B plus, but I think that's a good, you know, basic place to start. And then obviously there's reasons why you might have an a plus or an a minus or even a B plus than a lot of there's a lot of popular products. And from B B plus companies, I personally don't like going there, but again, on, you know, just kind of a superficial look, that's where you start.
Speaker 3 00:10:00 Well, I remember there was one instance in particular where I have a client who had a product that had a bonus, which sounds great, and an income writer that sounds great, but the fees from the income rider were steadily eating away at the bonus. And we had to put an end to that at some point had elapsed, some other person had written the application to place the client into that product. There was a desire to change it out. And we looked at a certain product that was from a B plus rated carrier. And it was great. I mean, it fit the need. So I agree with you. I won't say, oh, we'll never work with somebody that doesn't have an, a rating or lower. We typically like to work with the, a rated carriers, but there may be a reason why a really good company, and there are fine companies that don't have a ratings.
Speaker 3 00:10:50 I want to be clear, but in that particular situation, the product that fit the client's fact pattern, the best was not from an a rated carrier. So we have our reasons for looking at lower rated companies. But as I think the major point we're trying to drive home is we, as the producers must be able to articulate, why are we bringing these lower rated carriers to the table? I mean, because there's a whole bunch of carriers we could be looking at. And so at least we should be having this discussion about ratings of the case.
Speaker 2 00:11:22 One thing I've heard about certain a minus or B plus companies, and, you know, it came from an IMO. So I'm not quite sure, but it made sense to me in that there's several insurance companies that don't do a whole lot of life insurance business. They only do annuity business. And so one of the strength indicators from a ratings agency would be recurring revenue stream. So if you've got a company like New York life as a company, that's really heavy into life insurance and permanent life insurance at that. So they have a long history of really strong revenue, consistent revenue streams. And so that's one of the reasons why they get a really high rating where you might find a B plus company that doesn't really do any life insurance. They just do a new cities. Maybe the reserves are adequate levels are similar to New York life. I mean, I, you know, again, New York, life's the AA standard, but that's, I mean, have you heard that before? And I think that makes sense to me, doesn't it?
Speaker 3 00:12:20 I think it makes sense. I've personally not heard that, but I wouldn't dispute that. I think there's always what you're seeing here is not only are there extenuating circumstances, why we as producers might pick a certain product, but there's also extenuating circumstances why a certain carrier might have a certain rating, so we can kind of peel the onion back and see, well, wait a minute, are these, if you have two companies that are both well, capitalized one might have a higher rating than the other. And maybe there's a reason why.
Speaker 2 00:12:46 Okay. Yeah. And that's one thing to look at and you, again, that could mean that a B-plus company is perfectly fine and just as bit as safe for an annuity as someone else, but they kind of get dinged on that. Well, I mean, the ratings agencies look what they did with the companies back in 2008. I mean, they were all getting paid off to give them good ratings. So not to, you know, make a cynic out of everyone. But again, you have to look a little bit deeper. And the point of talking about this a show is we're trying to demonstrate to people that we really consider every aspect to it. And safety and security is a really big part of it. So, one, I know you guys know a little bit about why we choose certain companies and that's basically it along in the short of it.
Speaker 3 00:13:29 I think you're absolutely right. This is also a good time to remind people. You're listening to the annuity straight talk podcast. If you like, what you hear here, be sure to give us a review on the podcast rating platform of your choice. If you want to learn more about, you know, people like us, who give you the straight talk and talk about let's look at the company ratings, let's look at some of these other things. So you can make an informed decision. A good number to start is by calling 804 3 8 5 1 2 1. And since the last time I was on this podcast, we had a nice looking site, but now we have a really nice looking site and there used to be a green button. So I can't say that anymore. It's you've turned the color. It's white now.
Speaker 2 00:14:13 Yeah, we, we changed it with a website. So all the previous episodes will say green schedule a call button, but I suppose you'll figure out it's in the same spot top right corner. Any page on annuity, straight talk.com.
Speaker 3 00:14:25 All right, well, let's, let's keep finishing up with the credit ratings. We talked a little bit about, we've got am best. We have other entities like Moody's and Fitch. There's something out there called the Comdex ranking. And what happens is, is that it's a score. It's a composite. And if you have a company that's well rated by a M best and by Moody's and by Fitch, you add it all up. Ideally you're at a number close to one, and sometimes you might have a really good carrier that is eight plus by several of those entities, they're not rated by maybe one of those entities and they may have a lower conduct score. So again, all of these tools are not to be considered in a vacuum. We might say, okay, well set and such has this Comdex, this other entity has this Comdex score. If we look under the hood, maybe we're missing a ratings agency. And I think sometimes the ratings agencies require, you know, that's where they get paid, right by the carriers that are, that are under review. So there may be a reason why a circuit carrier is not reviewed by a certain ratings agency. Is that right, Brian?
Speaker 2 00:15:35 Yes, that is correct. I think it pays and I've heard one company in particular that was not rated said, well, we don't want to pay for ratings. And I know lots of companies that are rated by three of the big four, but not the fourth. And you would assume similarly, that's kind of what it is, but essentially what you're saying, the Comdex. And I liked that because it's a percentile scale. You can see where your insurance company ranks across the whole industry. There are some popular companies that are down in the 40th percentile right now, which is actually, that's a bit iffy. I'm not going to put anybody's money there. Cause I have to answer for the recommendations I make. But you know, I like what is 75, 80 for a bottom line then you're really kind of looking at the upper tier good, solid stable companies, various lines of business, and you know, and a pretty quality investment portfolio as well.
Speaker 3 00:16:22 And this is something too, by the way, whether you working with us or you're working with somebody else and you're listening to the podcast by all means, ask the financial professional, Hey, can I see what the ratings are? Is there a way to see the contact score or something like that? Right? So that could be very helpful in the discussion. Next we want again, give tools that empower our listeners. Like how could they get some information that's widely available that helps, you know, as they're doing the due diligence and one area. And when we were doing the research for this episode, one area that I came across was the website for the national association of insurance commissioners. Now let me back up. Insurance is regulated by the states under an act called McCarran Ferguson. And what McCarran Ferguson basically said was the states get to regulate the insurance company.
Speaker 3 00:17:16 And if they didn't do a good job, that's when the federal government would step in. Right now we have 50 commissioners and 50 states that are looking over all of these different insurance contracts. Some states commissioners may not admit one of the carriers into that state. So there's a possibility you could buy an annuity in one state, cross a border, and you can't buy that same contract. And another, these insurance commissioners they'll get together. And there's a group called the national association of insurance commissioners on their website, which I think we'll put in the show notes. There's actually a pretty nice feature called consumer information search. I found doing the research for this episode that we could put in, not every single carrier, but there was a good chance you could put in a certain carriers name. And there were features of the report that were provided such as a pie chart on assets, liabilities, and surplus.
Speaker 3 00:18:17 What business lines that insurance company is in. Are they in to your point earlier? Do they do life insurance? Do they do annuities alone? What was a simple chart showing profitability over the past three years, their net income. And then there was a bar graph showing complaint counts. Have we had more complaints from a certain carrier? Is the trend been up into the right, which would not necessarily be a good thing or have complaints been stable or maybe have they been decreasing all of those reports, you know, at least, uh, I put in one carrier and I was able to generate that report. I thought that was a very helpful and handy feature. So I wanted to single that out again. It's the consumer information search feature on the web page of the national association of insurance commissioners. And we'll put that link in the show notes, Brian,
Speaker 2 00:19:02 And that's a, that's very good for, I think it's a good resource for, I know a lot of people that like to do a bunch of due diligence, I'm a disclosure person. You are as well, a shock. We don't like surprises any contracts down the road. We like good relationships with people. And if everything's disclosed upfront, it may decrease the amount of business we do. Some people will feel overwhelmed by it, but in the end we want to have an open line of communication so that expectations are met and we don't have to worry about oops, explaining something after the fact. So, and on the NAC website, what's interesting is, you know, the complaints I was going to say, you know, there's one company that might do 5 billion of business annually that has 20 complaints. Whereas a company that does 1 billion in business annually might have 30 complaints. So they're not the two things are not one in the same. You've also got a, you know, it pays, if you're looking at one insurance company to maybe compare it to a couple of others. So you can see kind of where they rank is not everybody's, you can't please a hundred percent of the people at the time. Right?
Speaker 3 00:20:05 That's correct. You are going to have some complaints. And we don't know, we obviously, aren't going to know all of the details behind that complaint, but it's sort of that wisdom of the crowds. If you're getting a lot of complaints, you know, and the trend is up into the right over the past three years there, maybe
Speaker 2 00:20:20 It's going to, it's going to come down to what the complaint was as well. So there could be phones could go down at an insurance company and 10 people in one day say, I can't get ahold of anybody.
Speaker 3 00:20:31 That's true. There's always some extenuating circumstances that need to be continuous.
Speaker 2 00:20:35 Exactly. So I think we got that one out of the way, but this is one thing I would say I credit a Schoeke with, because he's helped me with this a lot where he's kind of found a few of these places where you can go get a little bit more information, think that's good for consumers. I know. Yeah. Like I said, a lot of people that really like to do their due diligence. And when we invite that, I always ask people, go find whatever you can talk to as many people as you want. Give me a chance to offer my perspective on that. But again, this is all things to empower the consumer
Speaker 3 00:21:07 Completely. Now I'm just going to wrap up here. This book came out in 1993, again, it's called all about annuities. The author is Gordon Williamson. He suggests people do their homework and he mentions certain factors to look at like how large a company is the company's residence, state major lines of business. How heavily is a carrier invested in junk bonds. And w is that company on the NEIC watch list? These were certain of the things that he included in this book. There was one feature that I noticed wasn't in there. And I thought it was important to discuss, which would be, I like to look at a carrier and say, okay, well who's running the carrier. Just like we might look at a company and look at their regulatory filings. And usually there's a bio of who is running the company. So I thought that's another important thing we could do is look at who's at the helm. What do you think about that, Brian?
Speaker 2 00:22:04 I think it's a great idea. So this is one of my jokes, just to kind of, I like to tell stories to illustrate the point, but if you, yeah, if you look at it and you say Bernie Madoff is running XYZ insurance company, cause he got what he's looking at, is he didn't he die? He died, didn't he?
Speaker 3 00:22:22 I believe
Speaker 2 00:22:23 So. But before he died, he was trying to get a medical pardon to spend, you know, so he'd go die at home. So you don't want him to come out and be the CEO of an insurance company. Right. And if you found out you were about to buy an annuity from something controlled by Bernie Madoff, you might think twice. Correct. And we have some more specific examples of that. But again, we're not going to try to, you know, drag down one company at all, but there there's some guys that have dings in the past that are running out, running insurance companies right now. And I certainly like to steer clear of those. What do you say?
Speaker 3 00:22:56 No, I agree. It's just like anything. When we, you look at a company, you might want to know who's at the helm, who's running the company. So it's definitely something to consider as one student due diligence. The other type of thing to look at is we've talked about the company. How is the company organized? Is it a mutual company where it's owned by its policy owners? Is it a stock company that's owned by its share owners? There's one entity we like out there that's employee owned. So that's something maybe that our listeners might want to know. Uh, again, it's not maybe the be all and end all to make a decision, but you get a color, you get some canvas, right. Of knowing, okay, this is what the company is about. This is how they've invested in their portfolio. This is who's at the helm.
Speaker 3 00:23:42 This is how they're rated by the carriers. It, our listeners to make an informed decision. Yes, absolutely. I couldn't agree more. Let's switch gears. And again, this is the annuity straight talk podcast. We're talking today about how to evaluate insurance companies. I want to introduce a little bit of a nerdy concept here, but I think it's something that could be of benefit nerds out there. So it's fine. Okay. I'm going to nerd away. So there's something called the risk based capital and that's our BC again, the NAC website, I think it's nic.org. They have an explanation. And what on their website and what risk based capital basically says is in the olden days, they would use kind of one broad brush stroke to look at all carriers. And it didn't matter how much capital they held. It was like regardless of their financial condition, their size and their risk profile, the carriers all had to hold the same minimum amount of capital in 1993, that changed.
Speaker 3 00:24:52 And so this book I was mentioning earlier came out of 93. They don't mention it in this book because that's when the risk-based capital approach came out. And it basically said from now on, the carriers would have to hold a certain minimum level of capital. That was based on two factors. Number one, the company size and number two, the inherent riskiness of the financial assets and operations. So that's why risk based capital is got. Now those factors to consider inside of risk-based capital. There are six classes, class, one being the highest class six being the lowest. So if we have class one, we have, you know, insurance carriers that are holding very highly rated corporate bonds or other types of bonds that are AAA rated, maybe AA rated and single a rated. So it's think very high quality bond. If we are holding maybe like class five and six, we're at the lower end of that scale.
Speaker 3 00:25:53 Now we're holding more. What do we call them? High income bonds. These are Brazilian treasuries, exactly Brazilian treasuries. So now what happens is these carriers, if they hold those types of bonds in their portfolio, they have to hold more like their reserves have to be more for those types of bonds to charge against a risk-based capitalist higher. So if you're a carrier and you want to have a certain payout, if you have a general portfolio that consists of highly rated bonds that are yielding as much, well, annuities are a spread based business. So you might not be able to have as much of a payout, right. But if you have potentially riskier bonds, then you're able to pay out more, but then you've got to reserve more as well under risk-based capital.
Speaker 2 00:26:44 Yes. It makes a lot of sense. And you can see, you know, based on the chart that you get basically a score divided by the number of assets you've got. Um, and I think most, you know, most A-plus companies are about, you know, 90% or more in class one or class two, which is, you know, zero risks. So class one is us treasuries and then their whole they're all holding bonds. And so if you look at it, you know, class 3, 4, 5 is basically just different grades of corporate bonds, maybe even government bonds. And then it gets down to, you know, class six, which would be, you know, bonds in default or, you know, similar fixed income and default. So
Speaker 3 00:27:25 Here's a tip when you're looking at a insurance carrier, you can ask for the latest annual report, hopefully they have one. And in that annual report, what I've noticed is you'll see like the balance sheet and then you'll also see usually a pie chart. And what I've typically noticed is they'll say this percentage is in NIC class one and class two, but you might also say, okay, well how much is in class one? And then separately, how much is in class two? So again, it's when you look at these annual reports and you see what is any IC class one and two, it's all part of this risk-based capital, which hopefully again, is another tool that can empower our listeners.
Speaker 2 00:28:05 Absolutely. Well, okay. So I'm going to ask you and put you on the spot. Do you have, like what, what's an adequate RBC ratio? Do you have any idea what the numbers should look like?
Speaker 3 00:28:15 It's a good question. I know when I was reading through this and preparing for it, even, I was like, oh my gosh, this is, this is complex. And other regulators are constantly looking at it. I think I'm the kind where I would probably look more at the pie chart and say, okay, well, how much do we have as class one and class two, but I don't quite, I couldn't eat, I'm being put on the spot and I don't quite have that right answer as to what exactly is that RBC ratio? Do you have?
Speaker 2 00:28:39 No, I don't actually, but it'd be interesting. And again, you know, I mean, it's going to be a pretty small number for our preferred companies because they're holding majority in class one and class two, which really has no negative effect on whatever the ratio would be is my feeling. And a lot of those are going to come out. It's just another tool that the rating ratings agencies use. That's going to be reflected in the ratings. And again, just to let you look at it, to see where does that rating come from? Is all, all there is to it. No, but it's a good indicator for those people. I don't even think it's that nerdy. It's just for like a lot of people I've talked to a lot of people in the last several months that are very concerned about a lot of different things. And you know, when you're putting a substantial amount of money into an annuity, just, it makes sense. So that's, again, why we're probably trying to, we're trying to provide a little bit more than you'd get elsewhere just to make help you make good decisions, whether you do business with us or not. So
Speaker 3 00:29:32 I love it. There's two other things I thought we would just mention. I've
Speaker 2 00:29:36 Got one at the end when you're done telling me I got one at the end.
Speaker 3 00:29:39 Oh, okay. So we got three things. You've got three things in, by the way before I go, just giving us a quick mental break, because we've been covering any IC and RBC and Karen Ferguson. So about a year ago when we first started the podcast, I think episodes one and two, we were in Spokane and we were recording live there fast forward. Now it's February of 20, 22. As we're recording this, I'm in Western Washington, you're in Montana and we've upgraded our equipment. We're using the same microphones now that you see on some of the nicer podcasts, right? Some of the bigger podcasts, right. Which are very much in the news these days, I think they're using the same equipment. So anyways, uh, just goes to show that, uh, we are constantly working on improving our craft, even when it comes to the audio equipment.
Speaker 2 00:30:27 It's true. And I think it makes a big difference in the long run. I'll call myself out. You know, I had some of the basic equipment. We started with cut other guests on the, on the podcast. And I didn't realize that at one point we, this is the second time we've we've recorded this because the first one, my camera was picking up the audio and the cameras about six feet away. So, um, and then with other people, they were just using computer audio. I was using the little singers, microphone and a hit I, and I wasn't as loud. And so the point just the point was like, get as good as we possibly can get and make it as high quality as, as we can. So,
Speaker 3 00:31:08 And the other board and thing to know is that there were no animals harmed in the manufacturing. This episode, Rambo is now able to mill around freely under the table and he doesn't bump into any microphone, legs or anything. Right. So now we've got these
Speaker 2 00:31:25 And he's pretending to sleep. Yeah. With the microphone stand, he used to roll around playing with the little stuffed animal or something and he'd jiggle it. So a lot of times people would see me like holding the microphone. I was steadying it because my dog was playing at my feet. So, but I did not, I didn't not harm him. I just sternly told him no, the benefit is a Shokes watching me when I do this. But so he sees me doing all these other things. But when he's talking, he's the only video you can see. So you guys won't even see some of the shenanigans. I had to go through to get my dog calm down because I made sure to do it when he was talking. So anyway,
Speaker 3 00:32:03 Anyways, we continue to be very family friendly and dog friendly at annuity straight talk, be sure to give us a call 804 3 8 5 1 2 1 with your questions and make sure to leave some feedback on this episode and others. Two last things I was going to mention. Number one, there is a working group within the NIC, the national association of insurance commissioners. They have a life risk-based capital working group. And there was an article from think advisor back in 2019, now three years ago. And they were basically saying that they work in group, was looking at the way risk-based capital was assessed for fixed indexed annuities. And they're currently evaluated using if I understood the article, right, they're using a variable rate securities approach and under, uh, something that's under consideration, they're looking at maybe evaluating fixed index annuities, using the same methodology as fixed rate annuities and single premium life insurance.
Speaker 3 00:33:01 So there may be some regulatory changes for risk-based capital for fixed index annuities. That's what I saw from that article. I think advisor, the other thing I was just going to mention is in the marketplace, clearly the landscape has changed over the past couple of years with a lot of private equity firms, making competitive acquisitions of different insurance companies in July of 2021, there was an article in the wall street journal and they cited a recent study by the ratings agency am best. And I'm going to just quote from the article. They were saying that these private equity backed insurance companies were doing good things like adding more cash and thus having higher capital levels than insurers traditionally had. So that's a good thing, but they were also taking on more risk. There was a higher amount of below investment grade debt than usual. So the key point is it may be a little bit harder for people to assess the strength of these companies with private equity ownership, because what worked, you know, 20, 30 years ago in terms of the way these companies were structured now with the new landscape, isn't quite the same.
Speaker 3 00:34:14 And I know there have been some journalists with the wall street journal, and I think your friend Kerry pecker with retirement income journal, they write a lot about what private equity is doing. But even then I would think there's a lot of moving parts. And we just try to understand these concepts as best we can, but clearly the overall landscape for the annuity market has changed given these acquisitions.
Speaker 2 00:34:37 Right? And I think having Carrie talk about some of that stuff would be, you know, I don't even want to get into the basics of it early because it's a fairly complex issue. I know he's been very concerned about it. He's been on top of it for the last year. He's been writing about it consistently. But again, those are things that we watch just as developments come. And sometimes it'll cause us to shift, shift our recommendations based on what we're familiar with and what we know we can provide assurance we'll we'll work out. So
Speaker 3 00:35:05 That's what I've got. Now you have something
Speaker 2 00:35:07 To, I got one more and then we're done. All right. Now I'm going to say, this is what I've told people for a long time is one of the most important parts. Once you factor in all that other stuff. Okay. Customer service is extremely important. Now I can tell you that because there are some companies I call and whoever answers the phone seems to have a smile on their face. If I came in like this, and this is how I talked, and everybody would say, that's boring. But if I come in here and say, Hey, great to see you guys. I'm happy to share some information with you. I think, you know, getting somebody on the phone, getting somebody qualified to do it and hearing a smile on their face. They know they work in a positive environment and it plays well to the service.
Speaker 2 00:35:53 We talked about way back. We talked about the art of annuity maintenance, and it goes a lot into that. Because if you think about it, a lot of the contracts that we get issued, their IRAs, we might have income requests. We might be doing a flexible approach. Maybe we have RMDs, uh, all these things in there times when we need forms from the company. So, you know, that's things that happen when you maintain a contract, the forms you need to access for stuff or for different actions in the contract might change from year to year. You want helpful, happy people that are generous with their time. I've had the opposite experience with a couple of companies where it sounds like the phone's ringing in an empty basement warehouse. And it's like, man, and you get some hello. Yeah. What do you need? It's on the website. Go find it. So I think customer service, uh, lends itself well to the experience you have within an annuity, once you've settled on every other part of it. So that's, that's my addition to this.
Speaker 3 00:36:55 I love it. I think you're absolutely right. And we want, I think that song went shiny, happy people, having fun. We want people who worked for a great company that are enjoying what they do and adding to people's lives.
Speaker 2 00:37:10 It's an excellent indicator of how the company, but I, I, you know, I, I like to say I can read people. It's an excellent indicator of, you know, the positivity in the company and that's going to extend to all different levels of it. So, anyhow,
Speaker 3 00:37:24 Well, this is going to tie it all up and put it in a key takeaways here from this episode, right? Cause we want people like what was the main point of this
Speaker 2 00:37:32 Diatribe?
Speaker 3 00:37:35 So ultimately, you know, we, as people who work with annuities are going to submit a proposal and show, you know, I would use this product, but the product is from a certain carrier. Well, what we hope if nothing else you take away from this episode is why did you pick this carrier? And can you, Mr. Producer provide information that helps me understand that carrier a little bit better and you don't have to wait for that person to provide that. Like, it might be beneficial if the salesperson says, okay, well here's a best, here's the contact score or whatnot. But then at the same time, you can also go onto websites like the NEIC, look at that consumer information, search, get some information. And then at the end of the day, have a very hopefully proactive. And what am I trying to say? The, uh, uh, a very good discussion that leads to the outcome that says, yes, I can confidently decide to put this money into this annuity, this carrier. That is the key point of what we've been trying to convey today.
Speaker 2 00:38:39 Absolutely. And I think he did a good job. I appreciate you putting the outline together. Want to know everybody aside from that last little point I made, it was 100% back by popular demand of founding creator of the annuity straight talk podcast. It's a pleasure to have you as a friend and a colleague, a Schoeke and want to remind everyone to go to the annuity straight talk.com to create or schedule an appointment top right corner or call 804 3 8 5 1 2 1. Why don't you give everybody your phone number, show up in case somebody wants to call you directly?
Speaker 3 00:39:13 Sure. My number of top planning is 8 7 7 2 3 4 plan that's 8 7 7 2 3 4 plan. And be sure again, to subscribe to annuity straight talk, if you liked what you heard and you want to be kept abreast of all the new episodes that are coming out and be sure to provide feedback, we welcome it. And that's the way we get back.
Speaker 2 00:39:35 We're in this to, uh, we w we get better. You get better. So that's the point of it. The stronger we get, the better it serves you. And I want to thank everyone for joining us today. Uh, we'll have a show back real soon for another topic. Not sure when, but it might be next week, maybe the week after. We'll just have to see. So everyone have a great day. Thanks for joining us. And we'll see you next time.
Speaker 1 00:40:08 You've been listening to annuity straight talk. The preceding information is for informational and educational purposes only, and does not represent tax legal or investment advice. The views expressed by guests on this program are their own and do not necessarily reflect the views of nerdy straight or no information presented today should be acted upon without meeting with the licensed. It is important that you read all insurance contract disclosures carefully before making the purchase decision guarantees are based on the financial strength and claims paying ability,
Speaker 4 00:40:56 Uh, showcase. Ron G is an investment advisor, representative of insight, folios and sec registered investment advisor. The firm only transacts business in states where it is noticed, filed, or is excluded or exempted from notice violent requirements, any fee-based financial planning and investment advisory services are offered through his association with insight folios top wedding LLC is not a registered investment advisor and is not another name under which insight folios provide services. Insurance products and services only are offered through top planning, LLC insight, folios Inc, and top blending LLC are not affiliated companies.
